In the most recent Canadian Federal Budget, under the heading of ‘Updating Tax Measures to Reflect Changes in the Economy’, a change was proposed to how the GST/HST will affect ride-sharing businesses, such as Uber and Lyft. In particular, the 2017 Federal Budget proposed:
Amend the definition of a taxi business under the Excise Tax Act to level the playing field and ensure that ride-sharing businesses are subject to the same GST/HST rules as taxis.
The rules for taxis prior to the budget was that if you were a self-employed taxi or limousine driver in the taxi business, you must have registered for the GST/HST. The Canada Revenue Agency (CRA) stated that a driver would be seen as being self-employed in one of the following situations:
- You own your taxicab/limousine.
- You lease a taxicab/limousine from an owner for a flat fee, either on a daily, weekly, or monthly basis.
- You lease the taxicab/limousine from an owner for a percentage of fares.
Under 123 of the Excise Tax Act, a ‘taxi business’ is defined as “a business carried on in Canada of transporting passengers by taxi for fares that are regulated under the laws of Canada or a province.” It was thought that ride-sharing businesses such as Uber did not meet the definition due to the lack of regulation under the law of Canada or a province. As a result of this budget, the definition of a taxi-business is being proposed to be changes as follows from the Notice of Ways and Means to Amend the Excise Tax Act:
(a) a business carried on in Canada of transporting passengers by taxi or other similar vehicle for fares that are regulated under the laws of Canada or a province; or
(b) a business carried on in Canada by a person of transporting passengers for fares by motor vehicle — being a vehicle that would be an automobile, as defined in subsection 248(1) of the Income Tax Act, if that definition were read without reference to “a motor vehicle acquired primarily for use as a taxi,” in paragraph
(c) and without reference to paragraph (e) — within a particular municipality and its environs if the transportation is arranged or coordinated through an electronic platform or system, other than
- the part of the business that does not involve the making of taxable supplies by the person,
- the part of the business that is the operation of a sightseeing service or the school transportation of elementary or secondary students, or
- a prescribed business or a prescribed activity of a business; (entreprise de taxis)
The new definition is proposed to come into force on July 1, 2017. Therefore, as a result, if you are a self-employed ride-share driver, you will be required to charge and collect the GST/HST on your fees. The one bright side is the GST/HST registration will now allow you to claim back a portion of your GST/HST on items such as gas, car maintenance, parking and any other expenses that relate to your driving business. If you require further discussions on how the new legislation will impact you or if you need help registering, please contact your local DJB office for help.
Article written by: Greg Sawatsky, MAcc, CPA, CA